Postal Rate Commission
Submitted 11/9/01
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268–0001
POSTAL RATE AND FEE CHANGES, 2001
Docket No. R2001–1
RESPONSES OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERSS ASSOCIATION
(MMA/USPS-T22-26, 27, 28(A,B), 29(A-D), 31 and 32)
The United States Postal Service hereby provides the responses of witness
Miller to the following interrogatories of Major Mailers Association: MMA/USPS–T22-26,
27, 28 (A,B), 29(A-D), 31 and 32, filed on October 24, 2001.
Each interrogatory is stated verbatim and is followed by the response.
Interrogatories MMA/USPS-T22-28(C-F), 29(E-J), and 30 have been redirected
to the Postal Service for response. The redirected responses to 28(C-F) and 30 are
being filed today. The redirected responses to 29(E-J) are forthcoming.
Respectfully submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
_______________________________
Michael T. Tidwell
475 L'Enfant Plaza West, S.W.
Washington, D.C. 20260–1137
(202) 268–2998; Fax –5402
November 7, 2001
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-26 Please refer to Library Reference USPS LR-J-60, particularly
pages 15 and 16, and USPS witness Kingsley’s testimony on pages 9 and 10. Ms.
Kingsley’s testimony describes several factors that would make a letter non-machinable,
requiring manual processing throughout the Postal mailstream.
A.
Please confirm that for purposes of estimating metered mail letters costs, you
assumed that 100% of the letters would not be culled out or rejected by the mail
prep operation and sent directly to the RBCS for processing. If you cannot
confirm, please explain.
B.
Please indicate what postal requirements, if any, regulate single piece metered
letters to make sure that they are not culled out or rejected by the mail prep
operation.
C.
Please confirm that according to the direct testimony of witness Kingsley (USPST-39 at 9-10), the following factors can make an otherwise machinable letter nonmachinable. If you cannot confirm, please explain why not.
1. aspect ratio of less than 1.3 or greater than 2.5
2. closure device
3. non-square corners
4. rigid or odd-shaped contents
5. stiffness
6. flimsiness
7. misplacement of address
8. self mailer whose folded edge not parallel to longest dimension
9. booklet whose spine is not the longest edge and
10. unreadable or improper address
D.
Why is it that the letter mail processing mail flow that you use to derive the unit
processing cost for metered mail fails to include metered mail letters that might
not be machinable for any of the reasons described in part C?
E.
By using BMM as the benchmark from which to measure Automation cost
savings do you implicitly assume that BMM would be designed to meet
automation requirements in the same manner as Automation letters, in the
absence of a discount? If your answer is yes, please explain why you think that
BMM mailers would take the same care in designing their mail pieces as FirstClass automation mailers are required to take. If your answer is no, please
explain what steps you believe BMM mailers take in designing their mail pieces
to meet the Postal Service’s automation requirements.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-26 (CONTINUED)
F.
By using BMM as the benchmark from which to measure Automation cost
savings, you implicitly assume that, in the absence of a discount, BMM
addresses would be as complete and up-to-date to meet all applicable USPS
move update requirements as Automation letters in fact are? If your answer is
yes, please explain why you think that BMM mailers would take the same care in
maintaining complete, accurate and current addresses as First-Class automation
mailers are required to take. If your answer is no, please explain what steps you
believe BMM mailers take in maintaining their address lists to meet the Postal
Service’s worksharing requirements, state the basis for your belief, and provide
all documents you review in providing a response to this interrogatory.
RESPONSE:
(A)
Please see response to MMA/USPS-T22-24(A).
(B)
Please see response to MMA/USPS-T22-24(B).
(C)
Please see response to MMA/USPS-T22-24(C).
(D)
Please see response to MMA/USPS-T22-24(D).
(E)
Please see response to MMA/USPS-T22-24(E).
(F)
No such "assumption" has been made. To the extent that there are address
quality differences that result in cost differences between the benchmark and
presort letters rate categories, those cost differences are included in the
worksharing related savings estimates.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-27 Please refer to your model cost derivations where you include a
post office box sort as part of the incoming secondary and to Library Reference USPS
LR-J-117, file worksheet “Delivery Volumes.”
A.
Please define exactly what “post office box sort” means and whether or not this
includes depositing the letters into a post office box or a sack or tray for caller
service.
B.
For Automation letters, did you assume that 13% of the letters are addressed to
a post office box, as found by USPS witness Schenk? If no, please explain.
C.
For metered letters did you assume that 33% of the letters are addressed to a
post office box, as found by USPS witness Schenk for First-Class single piece
letters. If no, please explain.
RESPONSE:
(A)
These costs represent the tasks performed by the customer service (function 4)
clerks who case post office box mail directly into the box section.
(B)
No. The methodology used to estimate these costs is described on page 14 at
25.
(C)
No. The methodology used to estimate these costs is described on page 14 at
25.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-28 Please refer to page 20 of your Direct Testimony and page 1 of
Library Reference USPS LR-J-60, where you assume that the unit delivery cost for
metered letters would be the same as for non-automation, machinable mixed AADC
letters.
A.
Is it your understanding that the unit delivery costs as derived in Library
Reference USPS LR-J-117 are significantly affected by the number of letters
within a given category that are delivered to a post office box? If no, please
explain.
B.
What is the relationship between the number of letters delivered to a post office
box and the rate category within which a letter is mailed?
C.
What percent of First-Class single piece letters is projected to be delivered to
post office boxes in the test year? Please explain the basis for your answer and
provide all calculations.
D.
What percent of First-Class metered mail letters is projected to be delivered to
post office boxes in the test year? Please explain the basis for your answer and
provide all calculations.
E.
What percent of First-Class non-automation machinable AADC letters is
projected to be delivered to post office boxes in the test year? Please explain the
basis for your answer and provide all calculations.
F.
What percent of First-Class presorted letters is projected to be delivered to post
office boxes in the test year? Please explain the basis for your answer and
provide all calculations.
RESPONSE:
(A)
No. It is my understanding the delivery unit costs by rate category reflect
differences in the amount of mail that is delivery point sequenced.
(B)
I would imagine there is no correlation between the level of presortation and post
office box addressing.
(C)
Redirected to the United States Postal Service.
(D)
Redirected to the United States Postal Service.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
RESPONSE TO MMA/USPS-T22-28 (CONTINUED)
(E)
Redirected to the United States Postal Service.
(F)
Redirected to the United States Postal Service.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-29 Please refer to page 8 of your Direct Testimony, where you state
“[my] analysis relies upon shape-specific CRA mail processing unit costs, which are
reported by cost pool in the In-Office Cost System (IOCS).”
A.
Please provide a complete definition of the 1CANCMMP and LD79 cost pools.
B.
If workshare mail is plant loaded in a First-Class mailer’s facility, does the mail
bypass the operations for which costs are included in the 1CANCMMP Cost
Pool? If not, please explain your answer fully.
C.
Please state which cost pool includes costs associated with having USPS
personnel accept First-Class workshare mail when such mail is plant loaded at
the mailer’s facility.
D.
Please state which cost pool includes costs associated with having USPS
personnel accept First-Class bulk metered mail when such mail is delivered to a
USPS window or loading dock.
E.
For the Base Year and the most recent 12 months for which information is
available, how many First-Class automation mailers has the USPS made
arrangements with to have their high volume automation mail plant loaded?
F.
For the Base Year and the most recent 12 months for which information is
available, how many geographically distinct First-Class mailer facilities are
covered by plant loading arrangements?
G.
Please provide all documents describing the policies and criteria used by the
USPS in deciding which First-Class mailers should plant load their automation
mail.
H.
When did the Postal Service first begin having First-Class mailers plant load their
automation mail?
I.
For each year since the Postal Service began having First-Class automation
mailers plant load their mail, please provide the total number of First-Class mail
letters that were plant loaded. Please provide the sources for your answer.
J.
Please provide all studies or other documents which describe and/or quantify the
cost savings and other benefits that the USPS derives from having First-Class
mailers plant load their mail.
RESPONSE:
(A)
The operations mapped to these cost pools can be found in USPS LR-J-55,
pages 24 and I-27.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
RESPONSE TO MMA/USPS-T22-29 (CONTINUED)
(B)
Presort letters and cards would generally not incur any costs mapped to the
"1CANCMMP" cost pool unless that mail is being weighed into the MODS system
as "meter bypass" mail (MODS operation 020B).
(C)
Acceptance and verification costs are found in cost pool "LD79."
(D)
The answer to this question depends on where this mail enters the facility. If
BMM letters are entered directly at the dock, these costs would be included in the
"1PLATFORM" or "ALLIED" cost pools. If BMM letters are entered at the BMEU,
these costs would be included in the "LD79" cost pool.
(E)
Redirected to the United States Postal Service.
(F)
Redirected to the United States Postal Service.
(G)
Redirected to the United States Postal Service.
(H)
Redirected to the United States Postal Service.
(I)
Redirected to the United States Postal Service.
(J)
Redirected to the United States Postal Service.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-31 Please refer to Library Reference USPS LR-J-60, particularly your
model cost derivations for automation and nonautomation First-Class and Standard
letters.
A.
Please confirm that your mail flow models for each of the corresponding presort
levels, mixed AADC, AADC, 3-Digit, and 5-Digit, are nearly identical, with the
only change being a small difference in the Accept/Finalization rates. If you
cannot confirm, please explain.
B.
Please confirm that your cost models for each of the corresponding automation
presort levels, mixed AADC, AADC, 3-Digit, and 5-Digit, are nearly identical, with
the only change (aside from that discussed in part A) being a small difference in
the premium pay factor. If you cannot confirm, please explain.
C.
Please confirm that you used identical productivities for First-Class and Standard
Mail letters in your analysis. If you cannot confirm, please explain.
D.
Please confirm the results from your cost models shown in the table below for
automation and nonautomation letters. If you cannot confirm, please explain and
provide the corrected results.
Comparison of First-Class and Standard Mail Model Unit Costs
First-Class
Standard
Rate Category
Model
Model
Costs
Costs
Difference
Automation Mixed AADC
4.280
4.173
0.106
Automation AADC
3.368
3.286
0.082
Automation 3-Digit
3.017
2.942
0.074
Automation 5-Digit
1.823
1.778
0.045
Nonautomation Nonmachinable Mixed AADC
17.756
17.110
0.646
Nonautomation Nonmachinable AADC
12.236
12.078
0.158
Nonautomation Machinable Mixed AADC
4.192
4.097
0.095
Nonautomation Machinable AADC
4.192
4.097
0.095
Nonautomation Nonmachinable 3-Digit
10.254
10.295
(0.041)
Nonautomation Nonmachinable 5-Digit
5.709
5.888
(0.179)
Nonautomation Machinable 3-Digit
3.933
3.843
0.090
Nonautomation Machinable 5-Digit
3.933
3.843
0.090
E.
Please confirm that, except for nonautomation nonmachinable 3-Digit and 5-Digit
letters, First-Class letters have a slightly higher unit mail processing cost than
Standard Mail letters that can, for the most part, be tied to the premium pay
factor. If you cannot confirm, please explain.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T31 (CONTINUED)
F.
Please confirm that for nonautomation nonmachinable 3-Digit and 5-Digit letters,
First-Class costs less than Standard Mail because its lower package sorting
costs more than offset the impact of the premium pay factor. If you cannot
confirm, please explain.
G.
Please confirm the results from your cost models shown in the table below for
automation and nonautomation letters mail packaging sorting costs. If you cannot
confirm, please explain.
Comparison of First-Class and Standard Mail Package Sorting Costs
First-Class
Standard
Pkg Sort
Pkg Sort
Cost
Difference
Cost
Rate Category
Nonautomation Nonmachinable Mixed AADC
2.311
2.129
0.182
Nonautomation Nonmachinable AADC
1.980
2.129
(0.149)
Nonautomation 3-Digit
0.593
0.927
(0.334)
Nonautomation 5-Digit
0.593
0.927
(0.334)
H.
Please describe and define package sorting costs, explain why package sorting
costs are only incurred by nonmachinable letters (as opposed to machinable
letters), and explain why the package sorting cost per piece is so high?
I.
Why are package sorting costs for Standard Mail higher than those for FirstClass Mail for the AADC, 3-Digit, and 5-Digit presort levels, but lower than the
costs of First-Class Mail for the Mixed AADC presort level?
J.
Please explain why the average weight for a Standard Mail letter, which is 64%
higher than the average weight for a First-Class letter, has no effect on the unit
costs derived from your mail flow models.
RESPONSE:
(A)(B) In general, First-Class Mail letters and Standard Mail letters are processed using
the same MODS operation numbers. Consequently, it is not always possible to
collect data by class using postal data collection systems. In Docket No. R97-1,
separate data were collected as part of USPS LR-H-130. This library reference
include accept rates related to the Remote Bar Coding System (RBCS). Some
accept rates from that library reference are relied upon in my nonautomation
presort letters cost models. Consequently, the volumes processed in a given
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
RESPONSE TO MMA/USPS-T22-31 (CONTINUED)
operation in the First-Class nonautomation cost models are not identical to those
processed in the corresponding Standard nonautomation cost models.
The volumes processed in a given operation in the First-Class automation cost
models, however, are identical to those processed in the corresponding
automation Standard cost models.
The premium pay factors for First-Class Mail and Standard Mail differ, reflecting
the fact that First-Class Mail tends to be processed during the premium pay time
periods (Tours I and III) while Standard Mail is not (Tour II). These factors have
an effect on both the nonautomation presort letters and automation presort letters
costs.
(C)
Confirmed.
(D)
Confirmed.
(E)
It can be confirmed that, all else equal, the First-Class Mail premium pay factor is
higher than the Standard Mail premium factor. Consequently, the First-Class
presort letters model costs are higher than the corresponding Standard presort
letters model costs.
(F)
It can be confirmed that when the accept rates, premium pay factors and
package sorting costs are all taken into consideration, the model costs estimates
for the First-Class nonautomation nonmachinable 3-digit and 5-digit presort
letters categories are greater than the cost estimates for the corresponding
Standard presort letters categories.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
RESPONSE TO MMA/USPS-T22-31 (CONTINUED)
(G)
Confirmed.
(H)
The package sorting costs represent those tasks performed by mailhandlers that
pertain to package sorting based on the package presort level. These costs do
not apply to machinable ("upgradable" letters as they are currently defined)
because machinable letters must be entered in full trays with no packaging. The
costs are what they are because of the data that has been used to develop the
cost estimates.
(I)
Standard Mail letters has two nonautomation presort letters rate categories: basic
and 3-/5-digit presort. Consequently, separate package sorting costs had
already been developed for those rate categories. Given that fact, I used the
basic package sorting cost as the estimate for the nonautomation nonmachinable
mixed AADC and AADC presort letters categories. I used the 3-/5-digit package
sorting costs as the estimate for the nonautomation nonmachinable 3-digit and 5digit categories.
First-Class Mail only has one nonautomation presort letters rate category.
Consequently, I further de-averaged the package sorting costs to better
approximate the differences that might exist between the nonautomation
nonmachinable presort level categories.
(J)
As stated in my response to (A) and (B), disaggregated data are not available by
class. Along that same vein, disaggregated data are not available for mail pieces
of varying weights. CRA adjustment factors are applied to the model costs to
compensate for the fact that disaggregated data are not available.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-32 Please refer to Library Reference USPS LR-J-60, particularly your
CRA costs for automation First-Class and Standard letters on pages 8 and 60.
A.
Please confirm the CRA cost results as shown in the table below for automation
letters. If you cannot confirm, please explain.
(Please see the table on the next page.)
B.
Please confirm the base year percentages for volume presorted by level shown
in the table below. If you cannot confirm, please explain and provide the correct
percentage.
Comparison of First-Class and Standard Mail Automation Letters
Base Year Volume Percentages By Presort Level
Base Year %
Base Year %
Rate Category
FCM Auto Letters STD Auto Letters
Difference
Automation Mixed AADC
6.14%
7.35%
(1.21%)
Automation AADC
6.57%
8.97%
(2.40%)
Automation 3-Digit
53.49%
48.67%
4.82%
Automation 5-Digit
31.17%
35.01%
(3.84%)
Automation Carrier Route
2.63%
----2.63%
Total
100.00%
100.00%
0.00%
C.
Please confirm that your model derived weighted average unit costs for FirstClass Automation letters and Standard Automation letters are 2.683 cents and
2.656 cents, respectively, and that these derivations utilize the volume
percentages shown in part B. If you cannot confirm, please explain and provide
the correct average unit costs.
D.
Please explain why your model costs indicate that First-Class Automation letters
cost slightly more to process than Standard Automation letters, but actual CRA
costs indicate that Standard Automation letters cost more to process than FirstClass Automation letters.
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
MMA/USPS-T22-32 (CONTINUED)
Comparison of First-Class and Standard Mail Letter CRA Unit Costs
Source
BMCS
BMCS
BMCS
BMCS
BMCS
BMCS
MODS 11
MODS 11
MODS 11
MODS 12
MODS 12
MODS 12
MODS 13
MODS 13
MODS 13
MODS 13
MODS 14
MODS 14
MODS 14
MODS 14
MODS 15
MODS 17
MODS 17
MODS 17
MODS 17
MODS 17
MODS 17
MODS 17
MODS 17
MODS 18
MODS 18
MODS 18
MODS 18
MODS 18
MODS 18
MODS 19
MODS 41
MODS 42
MODS 43
MODS 44
MODS 48
MODS 48
MODS 49
MODS 79
MODS 99
MODS 99
NONMODS
NONMODS
NONMODS
NONMODS
NONMODS
NONMODS
NONMODS
NONMODS
TOTAL
Cost Pool
Abbreviation
NMO
OTHR
PLA
PSM
SPBS
SSM
BCS/
BCS/DBCS
OCR/
FSM/
FSM/1000
LSM
MECPARC
SPBS OTH
SPBSPRIO
1SACKS_M
MANF
MANL
MANP
PRIORITY
LD15
1BULK PR
1CANCMMP
1OPBULK
1OPPREF
1PLATFORM
1POUCHING
1SACKS_H
1SCAN
BUSREPLY
EXPRESS
MAILGRAM
REGISTRY
REWRAP
1EEQMT
INTL
LD41
LD42
LD43
LD44
LD48 EXP
LD48_SSV
LD49
LD79
1SUPP_F1
1SUPP_F4
ALLIED
AUTOMECH
EXPRESS
MANF
MANL
MANP
MISC
REGISTRY
----------
FCM Auto
0.000
0.000
0.000
0.000
0.000
0.000
0.211
0.885
0.097
0.006
0.002
0.000
0.001
0.005
0.002
0.015
0.003
0.190
0.001
0.002
0.051
0.006
0.050
0.057
0.225
0.290
0.131
0.043
0.018
0.001
0.001
0.000
0.001
0.002
0.005
0.004
0.035
0.000
0.109
0.064
0.000
0.010
0.190
0.023
0.040
0.062
0.208
0.200
0.000
0.002
0.294
0.001
0.080
0.006
3.631
Standard Auto
0.013
0.106
0.086
0.002
0.014
0.052
0.225
0.894
0.123
0.015
0.003
0.000
0.000
0.022
0.001
0.021
0.004
0.239
0.003
0.000
0.031
0.006
0.023
0.186
0.217
0.339
0.132
0.051
0.011
0.000
0.000
0.000
0.001
0.001
0.017
0.000
0.032
0.001
0.100
0.030
0.000
0.006
0.027
0.030
0.045
0.034
0.153
0.183
0.000
0.003
0.292
0.002
0.039
0.000
3.817
Difference
(0.013)
(0.106)
(0.086)
(0.002)
(0.014)
(0.052)
(0.014)
(0.009)
(0.026)
(0.010)
(0.001)
0.000
0.001
(0.017)
0.001
(0.006)
(0.001)
(0.049)
(0.002)
0.001
0.020
0.000
0.027
(0.129)
(0.008)
(0.049)
(0.001)
(0.008)
0.017
0.001
0.000
0.000
0.000
0.001
(0.012)
0.004
0.004
(0.001)
0.009
0.035
0.000
0.005
0.162
(0.006)
(0.005)
0.028
0.055
0.017
0.000
(0.001)
0.002
(0.001)
0.041
0.005
(0.186)
RESPONSE OF UNITED STATES POSTAL SERVICE WITNESS MILLER
TO INTERROGATORIES OF MAJOR MAILERS ASSOCIATION
RESPONSE TO MMA/USPS-T22-32 (CONTINUED)
(A)
Confirmed. Please note that this table includes the revised figures for USPS LRJ-60 that were filed on 11/05/01.
(B)
Confirmed.
(C)
Confirmed.
(D)
In general, First-Class Mail letters and Standard Mail letters are processed using
the same MODS operation numbers. Consequently, it is not always possible to
collect data by class using postal data collection systems. CRA adjustment
factors are applied to the model costs to compensate for the fact that
disaggregated data are not available.
CERTIFICATE OF SERVICE
I hereby certify that I have this day served the foregoing document upon all
participants of record in this proceeding in accordance with section 12 of the Rules of
Practice.
________________________________
Michael T. Tidwell
475 L'Enfant Plaza West, S.W.
Washington, D.C. 20260–1137
November 7, 2001